Trust Land Replacement Property in the Blues, 10 Years Later

State Trust Land

Photo: DNR

When DNR determines that a property is no longer suitable for long-term state trust ownership and management, it may be sold at public auction or made available for other government agencies to purchase. The proceeds from the sales of these lands go into the trust land replacement account (in sales of forested trust lands the value of standing timber goes to the beneficiary while the real estate value is deposited to the replacement account). It is the job of DNR land managers to continually be on the lookout for replacement properties that are suitable for long-term state trust ownership and management.

Approximately ten years ago, two privately-owned parcels in DNR’s Dayton Unit near the Blue Mountains were identified as potential replacement properties for the Common School Trust. At the time, both parcels – one in Garfield County and the other in Columbia County – were farmed as dryland agriculture. Recently, DNR completed its first re-lease negotiations on both properties. Let’s look back and evaluate these replacement properties and how they performed under DNR management over the past decade.

DNR received bonus bids on both properties after they were advertised for re-lease recently. Following the department’s re-lease process, both lessees chose to match these bids and, as a result, will retain the leases.

The parcel in Garfield County is located on the breaks of the Snake River and consisted of approximately 780 acres of farm land. This Crop Share Lease has a 5-year average of approximately 75 bushels per acre. Thanks to the recent wheat prices it has produced a 10 percent average rate of return on investment for the trust.

state trust land

Photo: DNR

The Columbia County parcel is adjacent to 320 acres of state trust land near the Tucannon River. It consists of 160 acres of grazing land and approximately 600 acres of dryland. A wind power lease was already in place when DNR obtained this parcel. In 2005, when Puget Sound Energy began commercial operations on the Hopkins Ridge Wind Power Project, nine 1.8 megawatt turbines were installed on this parcel providing the trust with payments for each kilowatt of power produced from the turbines. Because wind power and dryland agriculture are compatible, the trust has continued to receive lease payments from the dryland lessee as well as the power company. The average wheat production on this lease has proven to be 65 bushels per acre. The farm and wind power revenues combined produced a 39 percent rate of return in 2012.

Some citizens have expressed concern about DNR purchasing replacement property and removing that land from counties’ tax bases. It is important to remember that while DNR-managed land is exempt from tax, certain incomes – including revenue associated with dryland farm production – is subject to leasehold excise tax. Based on a percentage of the rent charged to the lessee, approximately 50 percent of leasehold excise tax revenues are returned to the county in lieu of property tax. Often, the value of the excise tax is equal to, if not greater, than the normal property tax.

The performance of these parcels is another example of how DNR looks to the long-term benefit of the state trust beneficiaries as well as to the needs of lease-holders and counties.

by Ryan Cloud, Dayton Unit Land Manager, Southeast Region